The Basel Committee on Banking Supervision published responses to frequently asked questions to clarify how climate-related financial risks may be captured in existing Pillar 1 standards.

Consistent with the objective of FAQs, the responses are intended to facilitate a globally consistent interpretation of existing standards given the unique features of climate-related financial risks and should not be interpreted as changes to the standards. The responses are consistent with the Basel Committee’s Principles for the effective management and supervision of climate-related financial risks that form part of the Committee’s holistic approach to addressing climate-related financial risks to the global banking system and seeks to improve banks’ risk management and supervisors’ practices in this area.

Banks should consider how to incorporate climate-related financial risks in their interpretation and application of the existing Basel Framework, and continuously develop their capabilities and expertise in relation to climate-related financial risks. Where appropriate, the responses explicitly acknowledge data limitations and recognise that practices will evolve iteratively over time, and therefore allow for flexibility while promoting a globally consistent implementation of the Basel Framework.

“The Basel Committee is taking a holistic approach to addressing climate-related financial risks to the global banking system in support of its mandate to strengthen the regulation, supervision and practices of banks worldwide with the purpose of enhancing financial stability.”

The FAQs are part of the Committee’s work addressing climate-related financial risks to the global banking system in support of its mandate to strengthen the regulation, supervision and practices of banks worldwide with the purpose of enhancing financial stability.

In pursuing this work, the Basel Committee is examining the extent to which climate-related financial risks can be addressed within the Basel Framework, identifying potential gaps in the current framework and considering possible measures to address them. This on-going work is holistic in nature, spanning regulation, supervision and disclosure.

Basel Committee issues responses to frequently asked questions (FAQs) to clarify how climate-related financial risks may be captured in the existing Basel Framework.

Source: Basel Committee